“We believe the market will view BMO’s third-quarter results favorably,” said John Aiken, an analyst at Barclays Plc, in a note Tuesday. “The dividend increase had not necessarily been anticipated and the bank was able to show some strong sequential growth in its U.S. platform.”

Related

Bank of Montreal, the last Canadian lender to boost its payout since the financial crisis, raised its dividend 2.9% to 72 cents a share. The bank also lowered its payout range to between 40% and 50% of earnings, from a previous range of 45% to 55%. Scotiabank, Canada’s third-largest lender, raised its payout 3.6% to 57 cents a share.

“We increased the dividend, reflecting our strong capital position and our confidence in our continued ability to generate sustained earnings growth,” Bill Downe, chief executive officer of Bank of Montreal, said in the statement.

The two banks raised their dividends a week after Bank of Canada Governor Mark Carney said he wanted corporations to invest “dead money” from record cash reserves or pay it out in dividends to shareholders.

Beats Estimates

Bank of Montreal said it had profit excluding items of $1.49 a share, beating the $1.38-a-share average estimate of 15 analysts surveyed by Bloomberg.

Profit was boosted by the July 2011 takeover of Marshall & Ilsley Corp., the Wisconsin lender Bank of Montreal bought for $4.1 billion in the largest acquisition in its 195-year history. The lender is integrating M&I into its Chicago-based BMO Harris Bank consumer lending unit.

Bank of Montreal set aside $237 million for bad loans, up 3% from a year earlier.

The BMO Capital Markets investment-banking unit had profit of $232 million, 14% lower than a year earlier as underwriting and advisory fees fell 13% to $123 million. Trading revenue rose 38% to $213 million, led by interest-rate contracts and commodities.

Private-Client Group

The private-client group, which includes insurance and mutual funds, had profit of $109 million, up 4.8% from a year ago.

Scotiabank recorded an after-tax gain of $614 million for the sale of its Scotia Plaza office building in Toronto. Excluding one-time items such as the real estate sale, Scotiabank said it earned $1.22 a share. That compares with the $1.19-a-share average estimate of 15 analysts surveyed by Bloomberg News.

Domestic banking earnings rose 22% to $521 million because of asset and deposit growth, while international profit surged 29% to $442 million. Scotiabank has operations in 50 countries and this month announced acquisitions in Colombia and Mexico.

“There’s no question that the GDP growth is going to be higher in those areas” than in North America, Tom Lewandowski, an analyst at Edward Jones & Co. in St. Louis, said in an interview before results. “I think it’s one of the competitive advantages of Bank of Nova Scotia.”

Wealth management profit climbed 9.2% to $284 million, while investment-banking profit climbed 31% to $398 million. Scotiabank set aside $402 million for soured loans, compared with $250 million a year earlier.

Scotiabank’s quarterly profit was the second-highest for a Canadian bank, trailing Toronto-Dominion Bank’s $2.31 billion in the first quarter of 2006.

Royal Bank of Canada, the country’s largest lender, Toronto-Dominion, the No. 2 lender, and Canadian Imperial Bank of Commerce, the fifth-biggest bank, report Aug. 30.